Goldman plans stock sale -- and an exit from U.S. bailout

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At Goldman Sachs Group, the U.S. Treasury became one managing director too many.

The Wall Street giant late today confirmed rumors that had been bubbling in recent days: It plans to raise $5 billion in new capital via a stock offering, and use those proceeds and other funds to repay the $10 billion the company got last fall as part of the Treasury’s financial-system rescue.

That could make Goldman the first major bank to repay the bailout money -- and thus the first to get out from under the government’s restrictions on executive compensation and dividend payments, among other things.

Exiting the so-called TARP (Troubled Asset Relief Program) won’t be as simple as writing a check, however. Goldman must pass the ‘stress test’ that regulators now are conducting at major banks, to ensure that they have the capital to survive a worsening economy.

‘After the completion of the stress assessment, if permitted by our supervisors and if supported by the results of the stress assessment, Goldman Sachs would like to use the capital raised plus additional resources to redeem all of the TARP capital,’ the company said in a statement today.

Goldman Chairman Lloyd Blankfein had made clear in recent weeks that he wanted out of the government partnership necessitated by the Treasury’s TARP investment.

But of course, Blankfein couched this in terms of what would be best for taxpayers, not just what would be best for Goldman and its legendary franchise.

He said last week said that banks had ‘not a choice, but an obligation to taxpayers’ to repay the government as soon as possible.

It will help that Goldman also today reported much-better-than-expected earnings for its first fiscal quarter ended March 27, reinforcing investors’ faith that the company will remain Wall Street’s premier money machine. . . .

Goldman said profit was $1.66 billion, or $3.39 a share, compared with $1.47 billion, or $3.23 a share, a year earlier. Analysts had expected the firm to earn about $1.60 a share. It appears that Goldman benefited from investors’ hunger for bonds in the first quarter, as stock markets worldwide sank for most of the period. The company said revenue in its unit that trades and invests in bonds, currencies and commodities soared to a record $6.56 billion, more than double the $3.14 billion of a year earlier.

By contrast, Goldman reported lower revenue year-over-year in every other division, including stock trading, investment banking and asset management.

Goldman shares were down modestly in after-hours trading, following the earnings report and stock-sale announcement. The price eased to $127.85 after rising $5.82 to a six-month high of $130.15 in regular trading.

Some profit-taking wouldn’t be a surprise, given the stock’s recent performance: It’s up 54% this year, while the average financial stock in the Standard & Poor’s 500 index still is down 11%, even after the 84% surge since March 6.

-- Tom Petruno